Born in the LBO boom
EBITDA took off in the 1980s cable-and-telecom buyout era because those businesses were drowning in depreciation while throwing off cash.
Deal history
EBIT & EBITDA Calculator
Inputs & Options
Mode: Simple
Provide any two and the tool derives the third.
Formula: EBIT = EBITDA − D&A + Other operating.
Results
EBITDA
£0.00
EBIT
£0.00
D&A
£0.00
Other operating
£0.00
EBITDA
EBIT
EBITDA margin
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EBIT margin
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Understanding EBIT & EBITDA
EBIT (Earnings Before Interest and Taxes) reflects profit from core operations before financing and tax. It incorporates non-cash charges like depreciation and amortization, so it captures the cost of using long-lived assets in the period. EBITDA adds back those non-cash charges, offering a quick proxy for “cash operating profit” before interest and taxes. Both are non-GAAP metrics used for comparability, planning, and valuation.
Formulas
- EBITDA = Revenue − COGS − OPEX
- EBIT = EBITDA − D&A + Other operating
In practice, “Other operating” captures recurring operating items not included in OPEX (e.g., service credits, inventory write-downs). If you already know EBITDA or EBIT, use Simple mode: enter any two of EBITDA, D&A, and Other operating, and the tool derives the third.
When to use which?
Use EBIT to evaluate operating performance including the economic cost of assets. Use EBITDA when you want a cash-like view that strips out non-cash D&A — often helpful for quick comparisons or debt coverage analysis. For investment decisions where the timing of cash flows matters, consider pairing these with IRR/NPV.
Margins & interpretation
EBITDA margin = EBITDA ÷ Revenue; EBIT margin = EBIT ÷ Revenue. Higher margins generally indicate stronger operating efficiency, but context matters: industry capital intensity, lifecycle stage, and accounting policies can drive differences.
Informational only — not accounting advice. Keep inputs on the same period basis (monthly, quarterly, annually) for consistent results.
5 Fun Facts about EBIT & EBITDA
Covenant gymnastics
Lenders often set debt limits as a multiple of Adjusted EBITDA—watch for add-backs like “run-rate synergies” or “one-time” costs that can quietly inflate it.
Bank math
Aging makes EBIT rise
With straight-line depreciation, a plant’s EBIT can drift higher each year even if output is flat, simply because the depreciation charge is fixed while revenue grows.
Depreciation quirk
Capex blind spot
A data center can post glossy EBITDA while pouring cash into new servers—EBITDA ignores capital intensity, so pair it with capex or free cash flow.
Capital intensity
Cash can beat EBITDA
Subscription-heavy businesses sometimes run negative EBITDA but positive cash because customers pay upfront, creating a working-capital tailwind.
Timing twist